Return on invested capital measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Tesla Inc's annualized return on invested capital (ROIC) for the quarter that ended in Sep. 2018 was 11.79%.

As of today, Tesla Inc's WACC % is 6.14%. Tesla Inc's return on invested capital is -9.74% (calculated using TTM income statement data).
Tesla Inc earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Tesla Inc Annual Data

Dec08

Dec09

Dec10

Dec11

Dec12

Dec13

Dec14

Dec15

Dec16

Dec17

ROIC %

-15.53

-20.07

-35.68

-11.66

-15.43

Tesla Inc Quarterly Data

Dec13

Mar14

Jun14

Sep14

Dec14

Mar15

Jun15

Sep15

Dec15

Mar16

Jun16

Sep16

Dec16

Mar17

Jun17

Sep17

Dec17

Mar18

Jun18

Sep18

ROIC %

-18.32

-19.35

-18.80

-15.34

11.79

Competitive Comparison

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.

Tesla Inc Distribution

* The bar in red indicates where Tesla Inc's ROIC % falls into.

Calculation

Tesla Inc's annualized Return on Invested Capital (ROIC) for the fiscal year that ended in Dec. 2017 is calculated as:

Note:
The Operating Income data used here is four times the quarterly (Sep. 2018) data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Explanation

Return on Invested Capital measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. The reason book values of debt and equity are used is because the book values are the capital the company received when issuing the debt or receiving the equity investments.

There are four key components to this definition. The first is the use of operating income or EBIT rather than net income in the numerator. The second is the tax adjustment to this operating income or EBIT, computed as a hypothetical tax based on an effective or marginal tax rate. The third is the use of book values for invested capital, rather than market values. The final is the timing difference; the capital invested is from the end of the prior year whereas the operating income or EBIT is the current year's number.

Why is Return on Capital important?

Because it costs money to raise capital. A firm that generates higher returns on investment than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Tesla Inc's WACC % is 6.14%. Tesla Inc's return on invested capital is -9.74% (calculated using TTM income statement data).

Be Aware

Like ROE and ROA, ROC is calculated with only 12 months of data. Fluctuations in the company's earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.

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